US President Donald Trump dropped the much-dreaded tariff bombshell at Rose Garden White House on Thursday. In a higher-than-expected tariff list, Trump announced 10 percent baseline levies across the board. Trump, in his 50-minute speech, said that this was the 'Economic Freedom Day' for America. For India, the US President announced 26 percent 'kinder' reciprocal tariffs. Despite US being a significant trading partner of India, Trump has termed the latter as a “tariff king” and “tariff abuser”.
Recently, the White House said India imposes a 100 per cent tariff on American agricultural products. It said the high tariffs imposed by other countries made it "virtually impossible” for US products to be imported into those nations. It also criticised New Delhi's trade policies, such as the "Make in India" initiative, agricultural tariffs, and limitations on dairy imports.
Notably, from 2021-22 to 2023-24, the US was the largest trading partner of India, accounting for about 18% of India’s total good exports, 6.22% in imports, and 10.73% in bilateral trade.
Let’s take a look at the Indian sectors most vulnerable to these tariffs, analysing the potential economic impact and strategic considerations for each.
Textiles and apparel
The textile and apparel industry of India stands as one of the most exposed sectors to the new US tariffs. In FY 2023-34, India exported approximately $9.6 billion worth of textiles and apparel to the U.S., accounting for 28% of its total exports in this category. The imposition of tariffs is likely to make Indian products more expensive and less competitive.
While the overall textile export to the US was 28% of the overall textile exports in 2023-24, some articles are specifically vulnerable, such as carpets. The US accounted for a whopping 58% of carpet export.
Pharmaceuticals
In 2024, the Indian pharmaceutical exports to the US valued at USD 127 billion. The tariff imposition could increase the cost of Indian generic medicines in the United States market. As a result, the price hike will subdue the competitiveness of Indian pharmaceuticals, thereby leading to reduced sales and market penetration.
Agriculture and seafood
According to an analysis of the think tank Global Trade Research Initiative (GTRI), the hardest-hit sector in agriculture would be fish, meat, and processed seafood, with $2.58 billion in exports in 2024, facing a 27.83% tariff differential.
The US is a major destination for Indian shrimp and other seafood products. Tariffs could increase prices, making Indian seafood less competitive compared to products from other exporting nations.
Liquor, meat and sugar
The highest tariff hike at 122.10% on alcohol, wines and spirits will come into effect, although exports are only USD 19.20 million.
Similarly, for dairy products (trade worth USD 181.49 million), the tariff hike of 38.23 per cent will lead to higher prices in the US market, reducing competitiveness and affecting export volumes in these sectors.
Dairy products, with exports worth $181.49 million, could be "severely" affected by a 38.23% differential, "making ghee, butter, and milk powder costlier and reducing their market share in the US," GTRI Founder Ajay Srivastava told news agency PTI.
Footwear
The footwear industry, with exports worth $457.66 million to the U.S., faces a tariff gap of 15.56%. This substantial tariff could make Indian footwear significantly more expensive in the U.S. market, leading consumers to opt for alternatives from other countries, thereby impacting Indian manufacturers and exporters.
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